Mines & Mineral bill is a reformative measure

Published : Monday, 06 April, 2015 11:25 AM

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Mines & Mineral bill is a reformative measure

The passage of Mines and Minerals (Development and Regulation) Amendment Bill, 2015 along with Coal Mines (Special Provision) Bill is a significant legislative breakthrough in the history of mining in India. Together these two bills can usher India’s faltering mining sector in an era of transparency and provide a much-needed fillip to minerals output, which has been stagnating for years.

While the Bill was easily approved in the LokSabha where the BJP and allies have a majority, the government had to do muster numbers in the RajyaSabha and navigate select committee screenings. In the upper house, the Congress and the Left parties opposed the Bill, but the government received the support of BSP and Trinamool Congress.

The Bill amends the Mines and Minerals (Development and Regulation) Act of 1957. For starters, the Bill adds a new fourth schedule in the 1957 Act to include mining of bauxite, iron ore, limestone and manganese ore as notified minerals. Furthermore, the lease period has been enhanced from the existing 30 years for all minerals other than coal, lignite and atomic minerals. There is no provision for the renewal of mining concessions, unlike the 1957 Act.

In relation to auction of notified and other minerals, the state governments will grant mining leases and prospecting license-cum-mining leases along with the Union government’s approval. The terms and conditions for selection of bidders as also the procedure for auctions will be prescribed by the Union government. Another highlight is that the Union government is permitted to increase the area allowed for mining, instead of granting additional leases as per 1957 Act.

The central government also retains the discretion to reserve some mines exclusively for some specific purposes. Another feature of the Bill is the District Mineral Foundation, which will be set up in mining areas to address local grievances. The National Mineral Exploration Trust will be set up for regional and pan-India planning and detailed mine exploration.

The Bill, as said earlier, will give a huge boost to India’s faltering mining output, which has been witnessing stagnation for the last couple of years. The output growth in the sector was just 1.3% in April-January in 2014-15, while it was negative at -2.8% in January this year. Most importantly, the passage of Coal Mines Bill effectively ends government monopoly over the extraction of coal, which has existed since 1973 when the Indira Gandhi government nationalized the sector.

The government monopoly has been primarily blamed for chronic coal shortages, leading to costly imports by power and metal producers. Despite having reserves of 301 billion tons of coal, which is the fifth largest in the world, India faces severe power shortages impacting the industry and individual consumers alike.

The legislative nod for the auction of coal blocks (already underway through via e-auction) will replace the January ordinance and provide closure to one of the biggest scandals in independent India’s history. The Supreme Court had cancelled the allocation of 2014 coal blocks to private companies on the ground that the process was arbitrary and illegal. The ongoing e-auctions have already garnered over Rs 2 lakh crore by way of royalties over a 30-year period from the 33 blocks auctioned in the first round for coal-bearing states.

According to media estimates, the government is expected to make windfall revenue exceeding Rs 15 lakh crore over 30 years from all the 2014 blocks. The figure is even more than what the Comptroller and Auditor General of India report on coal block allocations had estimated and opened a Pandora’s Box.

The two key mining reforms bills open up the path for foreign investment in the sector as Indian arms of foreign companies are entitled to bid for blocks, as well as for commercial mining of coal. The end of Coal India Limited’s near monopoly will, in fact, help the public sector behemoth as well to review and streamline its operations, focus on reforming its corporate strategy, infuse latest technology and best practices in the sector.

Competition could actually better prepare the company to handle India’s demand for coal and energy. Politically, the passage of the Bills is a significant victory for the Modi government and a significant push for its reforms agenda. The legislative cooperation between the BJP and its allies with regional adversaries like the BSP, Trinamool Congress, and BJD augurs well for future reform measures.

A glimmer of hope is that a broad consensus over the pace and trajectory of economic reforms in India is slowly gaining traction across political spectrum. This will help India’s case as a preferred destination for investments and improve global investor confidence in the country’s economy manifold.